ISLAMABAD, June 14, 2025 – A tense moment unfolded during the meeting of the National Assembly Standing Committee on Finance as Chairman Syed Naveed Qamar publicly cautioned Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial over proposed enforcement measures included in the Federal Budget 2025–26.

The warning came after Chairman FBR informed the committee that the government is targeting Rs312 billion in new taxation and Rs389 billion in enforcement-driven revenue collection, bringing the total to Rs701 billion in new revenue initiatives.

“You are talking about ‘draconian enforcement measures’—and we will deal with these when the appropriate time comes,” said Qamar, addressing the FBR chief. His remarks reflected growing unease among lawmakers over what they see as overly aggressive strategies to expand revenue collection.

FBR’s Aggressive Revenue Strategy Under Scrutiny

Chairman Langrial’s briefing included a breakdown of initiatives focused on digital enforcement, faceless assessments, and strict compliance monitoring. These are part of a broader FBR transformation plan aimed at closing the Rs7.2 trillion tax gap and raising the tax-to-GDP ratio, which currently lags behind regional benchmarks at around 10.5%.

The enforcement strategy, however, did not sit well with the committee. Lawmakers expressed concern that such measures could hurt small businesses, create bottlenecks at ports, and burden the general public — especially in the absence of proper checks and balances.

Digital Reforms Also Under Fire

The FBR’s broader reform agenda includes:

• Digital Production Tracking

• Digital Invoicing System

• Cargo Monitoring

• Faceless Assessment Systems

While intended to reduce corruption and improve transparency, these digital tools have faced criticism. Committee members highlighted technical glitches, delays in assessments, and cases of misclassification of goods under the new systems, especially in Karachi and other key economic zones.

Call for Balanced Approach

Chairman Qamar and other committee members reiterated that tax enforcement should not come at the cost of economic activity. They emphasized the need for the FBR to adopt a balanced approach—strengthening compliance while providing relief to honest taxpayers and small businesses.

As debate continues over the Finance Bill 2025–26, this exchange suggests that parliamentary resistance could shape the final form of enforcement policies. The Finance Committee is expected to continue reviewing the proposals in the coming weeks.

ISLAMABAD, June 14, 2025 – The Minister of State for Finance and Revenue and the Chairman of the Federal Board of Revenue (FBR) presented an overview of the proposed Finance Bill and a comprehensive summary of the FBR’s Transformation Plan during a high-level meeting of the National Assembly’s Finance Committee on Friday.

Massive Losses from Smuggling and Weak Enforcement

FBR Chairman revealed that Pakistan has incurred tax losses amounting to Rs500 billion due to rampant smuggling from border areas, particularly of petroleum products via the Chagai district in Balochistan. Despite persistent efforts, weak enforcement continues to cause significant revenue leakage.

He further disclosed that Pakistan’s tax-to-GDP ratio remains among the lowest in the region, standing between 10.4% to 10.5%. The FBR’s real tax growth—adjusted for inflation and GDP—was only 1% between 2016–18, and declined to -0.3% from 2018 to 2024.

Tax Gap Reaches Rs7.2 Trillion in FY 2024–25

Presenting the tax gap analysis, the FBR chairman explained that Pakistan faces an estimated tax gap of Rs7.2 trillion in FY 2024–25. This includes:

• Rs3.4 trillion in Sales Tax gap

• Rs2 trillion in Income Tax gap

• Rs0.5 trillion in Customs Duty gap

• Rs1.3 trillion in enforcement, autonomous growth, and systemic factors

Digitalization and Revenue Gains

Despite limited reforms, the FBR achieved notable success in digital enforcement. A key win was the recovery of Rs50 billion in additional revenue from the sugar industry, achieved without any change in tax rates, purely through enforcement measures.

Digital integration initiatives have led to the registration of 1,812 businesses with a combined turnover of Rs11.8 trillion. Currently, 489 companies are in the testing phase and 42 companies are already live under the digital system.

Transformation Plan and Reform Roadmap

The FBR is set to launch its Transformation Plan from December 2025, focused on automation, transparency, and improved compliance. Key components include:

• Digital Production Tracking

• Digital Invoicing

• Digital Enforcement Stations

• Cargo Tracking System

• Faceless Assessment System

A dedicated Delivery Unit has been created to coordinate these reforms and ensure timely implementation.

Concerns from the Finance Committee

Committee members voiced concerns over multiple issues:

• Increased tax on profits of small depositors – directed to be reviewed and reduced

• Gradual withdrawal of tax exemptions for FATA/PATA regions – deemed harmful for small businesses in these areas

• Faceless Assessment System – faced criticism for delays, inefficiencies, and high demurrage costs, especially in Karachi

• Digital Production Tracking errors – issues raised regarding misclassification of used/scrap vs usable materials

Chairman Syed Naveed Qamar warned that the cargo tracking and digital enforcement plans could create bottlenecks at ports. He also highlighted the underdeveloped mortgage culture in Pakistan and called for simplification of housing loan tax credits, urging the FBR to submit a threshold-based option table for consideration.

Upcoming Budget Measures Briefed

The FBR and the Minister of State briefed the committee on:

• Budgetary position and FY 2025–26 revenue targets

• Income and Sales Tax reforms

• Relief measures for salaried individuals

• Adjustments to Super Tax

• Advance tax rationalisation for services rendered to non-residents

• Reintroduction of tax credits on small housing loans

• Allowance for Sindh-based coal miners to sell beyond IPPs

• Dividend taxation on mutual funds

• Tax on e-commerce transactions

• Increased advance tax on cash withdrawals by non-filers

Parliamentarians Demand Action and Reforms

The committee strongly opposed new tax burdens on ordinary depositors and insisted on relief for small businesses, particularly in underprivileged regions. Chairman Qamar emphasized the importance of provincial cooperation in raising the national tax-to-GDP ratio.

IMF Presses Pakistan to End Tax Incentives by 2035 Under New Fiscal Reforms

ISLAMABAD – June 5, 2025:
The International Monetary Fund (IMF) has called on the Government of Pakistan to phase out all tax incentives currently offered to Special Technology Zones and Industrial Zones by 2035, as part of broader fiscal reform efforts.

During ongoing negotiations, IMF officials emphasized that Pakistan must submit a comprehensive phase-out plan before the end of this year. This requirement is part of the government’s commitments under the current agreement with the global lender.

According to IMF representatives, the move aims to promote fiscal discipline, eliminate revenue leakages, and enhance transparency in tax collection. The gradual elimination of sector-specific tax exemptions is expected to broaden Pakistan’s tax base and reduce its dependency on external financing.

Officials from Pakistan’s Ministry of Finance confirmed that the upcoming national budget is being prepared for the first time under a formal staff-level agreement with the IMF. This has added new layers of scrutiny and discipline to the budget-making process.

“The IMF has laid out clear conditions, and the government is committed to meeting all financial targets without exception,” a senior finance official told the press.

Sources within the ministry also indicated that the forthcoming federal budget will likely exclude any large-scale development projects due to strict fiscal limitations. Instead, the government is expected to implement comprehensive austerity measures to control the budget deficit and ensure compliance with IMF benchmarks.

The transition away from tax incentives—especially in emerging sectors like technology and industry—is expected to stir debate among stakeholders. However, officials argue that long-term economic stability requires difficult but necessary reforms.

As Pakistan prepares to unveil its federal budget later this month, all eyes are on how the government balances IMF demands with domestic economic and political realities.

LAHORE: Punjab agriculture authorities are hopeful that taxes on local cotton will be withdrawn in the next budget to provide it a level playing field.

Punjab Agriculture Minister Syed Ashiq Kirmani told a delegation of the Pakistan Cotton Ginners Association on Wednesday that Chief Minister Maryam Nawaz has carried the demand of abolishing taxes on local cotton to the pre-budget meeting of all chief ministers headed by Prime Minister Shehbaz Sharif in Islamabad on Wednesday.

The minister asked the ginners to be ready to start their units early this season to process the cotton sown earlier on at least one million acres in the province.

He did not agree with the proposition put forward by MPA Rana Saleem, who is also a ginner, that, like in the past, the import of cotton should be banned till local cotton is not fully sold out, Chaudhry Waheed Arshad, a spokesperson for the PCGA, told Dawn by phone.

FBR Proposes Doubling Withholding Tax on Non-Filers’ Cash Withdrawals

The Federal Board of Revenue (FBR) has proposed a significant increase in the withholding tax rate on cash withdrawals from banks by non-filers, aiming to boost revenue for the fiscal year 2025-26. Under the new proposal, the tax on cash withdrawals exceeding Rs 50,000 in a single day will jump from 0.6% to 1.2% for non-filers. This new rate will apply to all cash withdrawals, including those made via credit cards or ATMs.

These changes are part of the government’s broader strategy to penalize individuals who do not file their income tax returns. Starting July 1, 2025, the government plans to impose tighter financial restrictions on non-filers. The new proposal, which is part of the Tax Laws (Amendment) Bill, 2024, categorizes non-filers as “ineligible persons” and will bar them from engaging in various financial transactions. This bill has already been approved by the National Assembly Standing Committee on Finance and Revenue.

The government is considering a phased approach to implementing these measures, taking into account the potential revenue impact of immediately removing all withholding tax exemptions for non-filers. This isn’t the first time such a measure has been in place; the Finance Act 2023 had previously reintroduced a 0.6% tax on cash withdrawals over Rs 50,000 by non-filers.

ISLAMABAD: Industry sources have rejected claims by certain NGOs that the government will collect PKR 285 billion in revenue from the cigarette sector in fiscal year 2024–25, calling the figure unrealistic and not based on factual analysis.

According to officials and financial analysts, the actual revenue is more likely to hover around PKR 250 billion. This projection includes anticipated adjustments in June related to advance tax payments—a factor often overlooked in inflated estimates.

A key driver of the anticipated shortfall is the excessive Federal Excise Duty (FED) imposed on acetate tow, a crucial raw material used in cigarette manufacturing. While the industry had proposed an adjustable FED of PKR 4,000 per kilogram to curb illicit trade and enhance documentation, the government instead imposed a rate of PKR 44,000 per kilogram—an elevenfold increase.

This sharp hike has backfired, making smuggling significantly more profitable and pushing more players into the illegal trade. The scale of the problem is evident in the record seizures by law enforcement, which have already confiscated 447 metric tons of smuggled acetate tow in 2025—enough to produce nearly seven billion illicit cigarettes. This represents a major blow to the documented industry and a substantial loss to the national exchequer.

In a bid to crack down on illicit trade, the government recently introduced an ordinance authorizing provincial law enforcement agencies to take enforcement action against illegal cigarette operations. However, a formal notification required to implement this measure has yet to be issued, leaving enforcement efforts stalled.

Observers warn that this delay risks allowing illegal trade to expand further, eroding government revenues and undermining legitimate businesses. With the fiscal year nearing its end, policymakers are under increasing pressure to address regulatory inefficiencies and enforcement delays to protect vital revenue streams and ensure a fair competitive environment within the cigarette industry.

BUDGET 2025-26: Experts Urge to Ensure Transparency and Avoid Shocks

KARACHI: As the government prepares to unveil the federal budget for FY 2025-26, Pakistan’s top business and industry leaders have called for a transparent, stable, and pro-growth fiscal policy. They have urged the government to avoid any surprise measures and instead focus on broad-based tax reforms, relief for the salaried class, and meaningful support for exports and industrial growth.

The Pakistan Business Council (PBC), Overseas Investors Chamber of Commerce and Industry (OICCI), Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Karachi Chamber of Commerce and Industry (KCCI), and Site Association of Industry (SAI) have all presented detailed budget recommendations focused on long-term economic stability.

PBC Calls for Export Growth and Tax Rationalisation

Pakistan Business Council CEO Ehsan Malik emphasized the need to improve the external account and fiscal balance while also strengthening national defence through enhanced export revenues. The PBC has proposed fiscal incentives to accelerate exports and encourage local sourcing of inputs.

Malik called for the gradual withdrawal of the super tax, reduction in corporate tax rates, and elimination of multiple taxation on inter-corporate dividends. He also recommended a cut in the 18% general sales tax (GST), arguing that it promotes tax evasion and hampers business growth. According to him, an improved tax-to-GDP ratio should stem from expanding economic activity, not increased tax pressure on compliant taxpayers.

OICCI Urges Expansion of the Tax Net and Policy Consistency

M. Abdul Aleem, CEO and Secretary General of OICCI, advocated for bold reforms to widen the tax base by ensuring effective tax collection from the trade, services, and agriculture sectors. He echoed calls for tax relief for salaried individuals and a phased reduction in corporate and sales taxes over the next few years.

He urged the government to ensure transparency in policymaking, avoid abrupt changes, and engage all stakeholders in designing tax reforms that are consistent and sustainable.

FPCCI Focuses on Export-Oriented Growth

Saquib Fayyaz Magoon, Senior Vice-President of FPCCI, stressed the importance of strengthening Pakistan’s export sector, especially as the country looks to reduce its reliance on IMF support in the future. He cautioned against imposing new taxes on export-driven industries, warning that such moves would raise production costs and reduce global competitiveness.

KCCI Demands Fair and Transparent Tax Regime

Jawed Bilwani, President of KCCI, highlighted the need for a transparent and predictable tax system that broadens the tax base, removes distortions, and distributes the tax burden more fairly. He underscored the importance of simplifying procedures and eliminating inefficiencies to promote sustained industrial growth.

Bilwani also pointed to the challenges faced by the SME sector, including limited access to finance and a complex regulatory environment. He called for focused policy support to unlock the sector’s potential in employment and innovation.

SAI Advocates Pro-Industry Reforms and GST Harmonisation

Ahmed Azeem Alvi, President of the Site Association of Industry, urged the government to prioritize industrialization and export competitiveness. He recommended capping business income tax at 25%, abolishing the super tax, and rolling back recent controversial amendments to the Income Tax Ordinance.

Alvi also called for harmonisation of GST across provinces, reduction of the standard sales tax rate to 15%, abolition of the additional sales tax, and faster refunds to reduce informality and improve liquidity.

He further urged the government to eliminate tax exemptions in FATA/PATA, reform welfare programs, adopt digital governance systems, and implement a one-window operational framework. Additionally, he demanded the restoration of zero-rated status for export sectors and essential goods to ease the burden on manufacturers and exporters.

The Federal Board of Revenue (FBR) has made significant legal victories, including a major win against Bahria Town (Private) Limited, unlocking revenue to the tune of Rs36.14 billion previously stuck in litigation.

The development comes amid special interest and firm instructions from Prime Minister Shehbaz Sharif to improve FBR’s legal strategy and push for results in court, the Ministry of Finance said in a statement on Monday.

“FBR has significantly improved its legal framework and achieved major success in resolving long-pending cases.

“Acting on the PM’s directives, FBR vigorously pursued pending cases in the Islamabad High Court. As a result, last week the court ruled in favor of FBR in cases collectively valued at Rs36.14 billion,” read the statement.

Malik Riaz has occupied govt, private lands: NAB

Among last week’s major wins for the federal tax collecting authority were three high-value tax cases, with the most significant being the case against Bahria Town (Private) Limited.

“In this case, the IHC upheld a recovery decision in favour of FBR amounting to Rs26.446 billion.”

The case had been pending at various appellate forums for the past two and a half years.

Moreover, in two other corporate cases involving a total of Rs9.7 billion, the IHC also ruled in FBR’s favour.

“These victories are clear evidence of the government’s commitment to economic reforms,” read the statement.

According to the Ministry of Finance, revenue to the tune of trillions of rupees remains stuck in various legal disputes, hindering national revenue collection.

Thus, a coordinated legal strategy was developed for representation and litigation, which has now started yielding notable results for FBR, it added.

ISLAMABAD: Mubashir Akram, National Convenor of ACT Alliance Pakistan, has called for protecting Pakistan’s fiscal sovereignty by ensuring tax policies reflect national interests and local realities.

Speaking to journalists, he expressed concern over foreign influence—particularly from WHO, CTFK, and Vital Strategies—in Pakistan’s tobacco taxation, often ahead of budget season. He noted these organisations operated without proper registration or approvals.

“While public health is important, tax decisions must be made transparently, based on local data and enforcement capacity—not external agendas,” Akram said. He criticised WHO’s double standards, highlighting that its host country, Switzerland, has yet to ratify the tobacco control treaty it promotes globally.

Akram warned that further tax hikes could harm the legal tobacco industry, already heavily taxed in 2023, and fuel the Rs. 30 billion illegal trade, risking the loss of Rs. 300 billion in tax revenue.

He urged the government to support legal businesses, improve enforcement, and resist foreign pressure. “Policy decisions must come from within, through dialogue and data—not foreign campaigns,” he concluded.